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Dana B. Smith asked:




Taking into consideration the latest turn over of the housing market there are many consumers that have been left without a home. This is not need to happen to all consumers because with a little assistance and subprime mortgage aid this situation could be avoided. Obviously, it is not easy to get rid of a stressful mortgage, but now there being designed around the country some subprime mortgage assistance programs to help homeowners. There are many such programs which offers assistance especially in the United States. You need to make your own judgment when it comes to dealing such matters.

Finding subprime mortgage assistance is frequently as easy as calling your lender. Due to the costs that are involved when being in foreclosure, your lender will certainly agree to help and avoid this process. If you do not want to get in touch with them they are not able to provide borrowers the needed help for subprime mortgage holders. However, if you decide and contact a representative of your lender they should help you and get you in contact with specialized agencies who can deal with your type of loan. Another option is the lender possibility to offer you his own subprime mortgage assistance program.

There are some consumers which look for help in their local governments, but the programs offered are rare. Because many areas do not have necessary amount of money to solve the problems of all borrowers it is hard to believe that some really sustain these programs. Although the federal government is trying to create some programs to solve the problems with subprime mortgage, because of the government necessities their help is often delivered to late. For this reason, for many consumers there are not many options left.

Therefore, the best solution to find help when dealing with a subprime mortgage is to get in touch with your lender who is taking care of your mortgage. Plus, it is in their benefit that the payments stay firm, and often they are interested in making arrangements and to help you. But if you find yourself trapped in huge problems but still wanting to preserve your home, you could get assistance from your lender as a temporary deferment, or you could divide your missed payments in small amounts and add them in the fallowing payments.

It is important to start and look for help no matter the sort of subprime mortgage you have. This requires some phones to make and to sacrifice some of your time, but in this way you can find the best subprime mortgage assistance programs and which are specially designed for specific features you need . There may be some who have requirements as length in loan, the loan amount, the interest rate paid, that have to be met so that they could give you the help needed. The most important objective is to preserve your home safe and, that is why a little bit of your time in deciding how to get the appropriate subprime mortgage assistance it is worth the trouble.

Kate Ross asked:




Many lenders are offering a solution to this lack of down payment problem for those who want to eliminate the PMI variable from their mortgage loan payment equation: a combination of a mortgage loan and a home equity loan or personal loan to complete the 20% down payment. Is this really a solution? What are the benefits? What are the drawbacks?

Private Mortgage Insurance

Private mortgage insurance protects the lender against default by covering the mortgage payments in case the borrower cannot repay the loan for one of the reasons stated in the insurance policy.

Private mortgage insurance is not required for any mortgage loan but when it comes to all home loans where the amount is higher than the 80% of the purchase price of the loan, PMI payments are compulsory (with the exemption of VA loans and other preferred home loans).

Thus, in order to avoid paying private mortgage insurance charges, the borrower needs to obtain sufficient funds for a 20% down payment. As this is seldom possible, people usually cope with the higher payments and eventually they decide to refinance with better terms.
Yet, it is possible to get financing with advantageous terms and no PMI from the very beginning by using a combination of loans instead of a single mortgage loan with PMI payments.

Remember though, that if it is within your hands to obtain the necessary down payment in cash it is well worthy to do so even if you have to wait a few months because you will not only save yourself the PMI payments or the interests on the additional loan but you will also be able to obtain more advantageous terms on your mortgage loan.

Combination Loans Based On Equity

These home equity loans can provide you with the funding needed to obtain the 20% down payment to avoid Private mortgage insurance payments. Though the interest rates on these loans tends to be a bit higher than what is charged for the mortgage loan, in the long run, this implies lower payments than a single mortgage loan that would charge PMI fees. And sometimes, the costs are lower right away if you only need a smaller amount of money because you already have some savings for the down payment.

Whether it is advisable or not to obtain these loans instead of a single mortgage loan with PMI is a matter of discussion. But most importantly, it will depend on your particular situation and on market conditions. The smart way to go is to compare your options and have the lenders provide you with different loan quotes to see which one best suits your needs and desires. Sometimes the difference may not be too significant, but under certain circumstances you can save thousands of dollars in the long run.

D.K. Fynn asked:




Just a few days ago, someone asked, “How Can I Shorten The Years of My Mortgage?”

Indeed that is a good question, and I’ll try to explain. I won’t dive deep into all the details, but I’ll give you a quick response.

So Why Do Mortgages Last So Long In The First Place?

First, we need to address two areas: principal and interest, and how much is applied to each.

I’m sure you’re familiar with these, but let me re-establish something, so you know where I’m coming from: The most difficult problem we face in any loan is the principal balance-because the interest is charged on that balance.

Having said that, have you ever studied how your monthly payments are being allocated between principal and interest?

That is, what portion of your monthly payments go toward cutting down the principal, and how much goes toward the interest?

Though I don’t know your exact situation, I can wager that if you’re in the US, the overwhelming majority of each payment goes toward interest, NOT principal. Whether the interest rate is high or low, it’s the principal that causes the problem.

A few weeks ago, one of my friends was furious to learn that, of each payment she was making, only about $50 was going toward lowering the principal.

She was lucky, because she now has a chance to do something about it. Many Americans never realize how serious this is, because it robs us of our retirement. Banks front-load our loans, charging the majority of the interest at the beginning. The result is: we pay for our mortgages decades longer than we otherwise should.

You see, the fact that most of each of your payments go toward interest in the beginning, rather than principal, the bank is forcing you to make payments for a long, long time–much longer than you should.

Remember, we’ve established that the real problem is the principal, not the interest. Of course, interest is a factor, however, we must remember that the high principal is causing the higher interest allocation…

… and because the interest is calculated on the outstanding principal…

…so goes the seemingly endless cycle of unnecessary mortgage payments, because the principal doesn’t get reduced fast enough.

How To Shorten The Length Of Your Mortgage

So, regarding the question of how to shorten the number of years on your mortgage, a better question might be: “How do I apply more money toward lowering the principal?”

On thing’s for sure: your bank isn’t going to tell you any secrets, since their goal is maximize their profit on your loan.

It’s important that you find a way to make sure that a greater portion of your monthly payments apply toward your principal-not your interest. And there certainly are ways to do that!

Bill Burress asked:




With the tightening of underwriting guidelines many borrowers are getting turned down because their FICO scores are not high enough to meet the threshold requirements to be underwritten. Foreclosures are at an all time high and every week it seems the tightening is getting worse. Those with low FICO scores are often left out in the cold.

Lenders are using FICO scores to grade applicants to determine credit risk. A borrower may have a more delinquencies or collections or items on their public record that will reduce their score below many lender’s threshold FICO scores. Other factors that may reduce FICO scores can be the proportion of balances to limits on revolving or installment accounts. Some borrowers think that they can raise their scores by closing accounts. Many times this will lower their credit score. A borrower that has more than one name reporting on their credit may see a score hit. The same holds true with multiple addresses.

Some threshold scores are being raised with many lenders for underwriting purposes and as a result more borrowers are being turned down.

The key to getting the borrower approved is having programs where the threshold score is lower. Once that happens, the mortgage originator can at least look at the file and start verifying information and building a case for approval. Sometimes it’s a lot of work but many items can be explained to the underwriters if the borrower’s FICO score meets the minimum threshold level. This will work the same whether the borrower is trying to get refinanced or purchase a home.

Jim Cramer asked:




Many home buyers find it difficult to provide the required 20% down payment and are forced to pay private mortgage insurance, or PMI, in order to buy a home. Private mortgage insurance solves the down payment problem but creates another two: it increases monthly payments and on top of that it is not tax deductible. Fortunately, there is more than one way to get your desired home without having the 20% down payment and avoid PMI at the same time.

Terminating PMI When You Already Have One

The use of private mortgage insurance has been a great way to make it possible for a borrower to buy a home with as little as 3-5 % down payment and give the lender insurance in case the borrower defaults on the home loan. However since PMI payments can be significant, the borrower starts to ask himself/herself how to get rid of those payments.

The Homeowner’s Protection Act includes rules for automatic suspension of PMI payments and cancellation of PMI when 22% equity in the borrower’s home is reached. Those rules apply to mortgages signed on or after July 29, 1999, and exclude government-insured FHA or VA mortgages that are considered high-risk to default.

Additionally, disregarding the time when the mortgage was signed, the borrower may ask for PMI termination once s/he exceeds 20% equity.

Avoiding Private Mortgage Insurance via a Piggyback Loan

Piggyback loans are a very popular way of avoiding private mortgage insurance. It consists of taking a loan (first mortgage) covering 80% of the sale price of the home and taking and placing additional 5%, 10% or 15% on a second mortgage. A combination of 80% first mortgage, 5% second mortgage and 15% down payment is referred to as 80/5/15. Accordingly, the other two loan combinations are 80/10/10 and 80/15/5.

Although second mortgages generally have higher rates, in the end the borrower may save money because in contrast to PMI payments, now the loan payments are tax deductible.

Choosing a Finance Single Premium Option over Private Mortgage Insurance

Since an increasing number of borrowers are turning to piggyback loans in order to avoid PMI, the mortgage insurance industry came up with this solution claiming that it lowers monthly mortgage payments to the same or lower level as a piggyback loan. With this option homebuyers pay a single premium on their insurance and it is amortized over the term of loan.

One of the pitfalls of this solution is that few lenders offer this option, since Fannie Mae and Freddie Mac do not work with this kind of PMI structure.

Finding a Loan with No Private Mortgage Insurance

Loans with no PMI have one great disadvantage – they typically have higher interest rates. Instead of paying regular PMI, the latter is included in the higher rate of the mortgage.

Which of the above solutions will be best for you depends entirely on your particular case. Sometimes paying the private mortgage insurance might turn out more beneficial than choosing to avoid it with a second mortgage. Therefore you should consider your decision carefully and make all the necessary calculations in order to make the right choice.